Commentary

Newsletters

Problems, but no panic

Commentary: Key market timers sticking with their strategies

By

PeterBrimelow

NEW YORK (MarketWatch) — Stocks’ slide continues, but the bears are still unrampant.

First, a proprietary word. The Hulbert Stock Newsletter Sentiment Index (HSNSI), which monitors the average recommended equity exposure among a subset of the shortest-term stock market timers tracked by the Hulbert Financial Digest, stood at 52.5% on Wednesday night.

HSHSI has actually been strengthening in the teeth of the market decline — and Mark Hulbert was worried enough about it, from a contrary opinion point of view, when it stood at 47% a week ago. (See his July 3 column)

Stocks end lower on Fed signals

(3:04)

Investors pared most of their losses in late trading, but still handed the Dow Jones Industrial Average its fifth straight loss after the minutes of the Federal Reserve's June policy meeting showed few signs that central bankers were moving towards further action.

Nevertheless, there’s still no panic among the key market timers I looked at the beginning of this week. (See July 9 column)

Dow Theory Letters’ generally bearish Richard Russell was preoccupied last night with outlining his idea that the U.S. authorities will ultimately revalue gold
GCQ2
and ban gold trading, as in the New Deal. But he did comment on the day’s action:

“Pros are still betting on QE3. Note that with each passing day, new highs on the NYSE are dropping off. Upside momentum is finished.”

And after the market rallied late Tuesday (as it also did Wednesday) he asked: “Is the Fed buying the Dow
DJIA, +0.13%
at the close? It wouldn’t surprise me.”

This is a telling measure of mounting skepticism about the official sector. Ten years ago, Russell was ridiculing all talk of market manipulation. Now he accepts it in a throwaway line.

Stealth Stock Daily’s Dennis Slothower, in contrast, has always been a full-throated believer in market manipulation. But last night he merely remarked:

“The S&P 500 Index
SPX, +0.27%
isn’t far from being overbought on an intermediate-term basis… If the market can’t get advance through this resistance and we continue to see poor corporate earnings dead ahead, we are apt to see the next intermediate-term down leg develop in late-July/August period.

“The market is apt to oscillate rather than trend given so much uncertainly here in the summer months, but my feelings are that we are close to an intermediate-term top.”

This month’s issue of Pamela and Mary Anne Aden’s Aden Forecast came in Tuesday night. It’s typically complex, detailed and thoughtful, but the bottom line is that it’s still on the fence — still 40% long-term U.S. government bonds; 40% precious metals (physical and securities); 20% cash.

I thought I’d detected that the Adens were backing off their fear, expressed recently, of another 2008-type Crash. (See June 18 column). But in this issue they are still careful to caveat:

“Of course the chance of an accident is still a wild card that also has to be considered… the derivatives market alone is massive and it’s an accident waiting to happen.”

On a happier note, on Wednesday the latest issue of the Cabot Market Letter came in. Veteran editor Michael Cintolo says all his timing indicators are now positive, and that he is still sticking with his cautious bullishness — 50% in stocks. He writes:

“We’re taking our positive indicators at face value, but we’re also concerned about the behavior of many leading stocks and a growing increase in selling pressures. We will remain in a relatively cash-heavy stance until the movement of the stocks in the Model Portfolio indicate that it’s time to take action.

Cintolo is brave. In his current issue, he notes that back in December “good old fashioned chart analysis” alerted him a rebound in what he calls “the much-hated real estate sector”. He now says “the housing rebound has much further to go.”

And, talking of much-hated, among the stocks on Cintolo’s “Watch List” (meaning he may buy them “if the market can get its act together’): Facebook Inc.
FB, +0.61%

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.